Here is the typical blueprint of the options available out in the market. Some of you might have already known these vehicles, while some of you might be totally clueless to the financial world as I used to be. I used to hate figures, I used to hate dealing with money. In fact, if I could live in a world without money, I will truly appreciate that.
The reality sinks in with or without our involvement. The world deals with money, whether we like it or not. We will have monthly bills to pay, and we will need some form of income otherwise we might have to choose to live in the actual jungle instead of the urban jungle.
Why financial freedom? I don’t know for you and it is highly possible that each individual’s reason for pursuing financial freedom will be very different. After all, each man’s meat might be another’s poison. Same applies in this article. This short article will not cover extensively and definitely not exhaustively all the available options out in the market. It will however be a very good guide to those seeking a way out, and grasping the world, understanding how finances work.
#1 – Part Time Business
As most financial gurus like Robert Kiyosaki might have mentioned, one of the recommended ways to transition from the employee to a business owner, is to first own a part-time business which will eventually bring you to a point of being a “self-employed”. And bear in mind that the income from your part-time business should be at the bare minimum replaces your full-time income. Otherwise, if you really like to be “safe”, then transit only when you have at least 150% – 200% of your full-time income from your job.
That is critical because when someone takes that jump from an employee to being a self-employed, they have to be mentally prepared as well. Listen, there will be days that your income might take a massive dip and the only way to pull through is to have a strong mindset. By now, most would have realized, the money game is actually a reflection of your inner game with yourself. The money is just figures and representation. What really matters most is the mindset and mentality.
Can an employee overnight turn into a major business owner running over an organization of 300 employees? Yes! But the chances of failing within the next 5 years are exceptionally high. The statistics also shows that most businesses fail within the first 5 years, if not first 10 years. And those probability will not just depend on skills, intelligence and network, it will depend largely on the people dealing with it. Are they mentally ready for it?
Are you ready for it?
So the epic truth is, start something part-time on the side until you start to get a really decent result. Assuming 8 AM – 5 PM is your full-time job, start a part-time business from 7 PM – 10 PM during the weekdays. Of course, having said that, for those wanting to get out of the rat race at an even faster rate, will have to also increase the amount of commitment toward their part-time business.
I have personally encountered many individuals who work on their part-time businesses from 7 AM – 8:30 AM, start their job from 9 AM – 6 PM and then resume their part-time business from 6:30 PM to 1 AM. Needless to say, they made things possible for themselves and their families within 2 – 4 years.
Now next question will be, what are the available part-time businesses out there? Look out for my next upcoming posts on available part-time businesses and how to choose them. For now, let us move on to another way to work towards financial freedom.
#2 – Investments
Yet, this is another very commonly preferred method of making money work for us. There are strings attached to it in this sensitive topic, with different school of thoughts advocating differently toward investing.
The first school of thoughts that I know of are people who preached that investments can start even if a person is still an employee. As what MOST investors like to put it, “Do not put all your eggs into a single basket” and likewise they would apply the same exact concept into the way they manage their money, putting money into various types of investments and businesses to diversify and reduce risk.
I personally however subscribed to another school of thought.
There are no such things as guaranteed security or guaranteed returns, there is only perceived value and perception in which copywriting, sales and marketing techniques do best. As a general rule of thumb, low risks investments generate lower returns comparatively, while higher risks investments generate higher returns. That is typically why financial advisors have been taught to perform a risk appetite assessment for their clients prior to proposing possible investment vehicles.
As an employee, I wouldn’t recommend jumping right into the Investor quadrants, placing significant amounts of money into investments. And as we all might know, most investments require anywhere from $3,000 to $10,000 or perhaps even more than that, beyond $50,000. Which mathematically speaking, it could be from anywhere of 50% to 120% of an employee’s salary.
Those figures directly reflects that, it takes on average of about 3 – 6 months to save up (after deducting expenses) that particular amount of money so that you can “invest” just so to make 10% – 20% returns on investments per annum. Bear in mind, the higher ROI typically may mean higher risks.
Hence, that is to say an employee is by no means suitable to invest in his situation, given that he still wants to maintain his average expenditure per month. However, it is still possible to do it, perhaps by enduring for 2 – 5 years of tightening the belt by a massive extent. The risk level for an employee is higher as compared to other quadrants such as self-employed, business owner and investors. That can be observed from the typical income range and number of income streams each individual has.
It is exceptionally risky for an employee mainly because assuming he has only 2 income streams – a job and his investments, and if his investment fails, is he able to take that loss? Will the employee has the financial capacity and mental capacity to take a loss of $10,000 at a go? Will his job be able to last such that he regains yet another $10,000 to play another round of this investment game?
Then again, for those who likes to understand more about investments and various routes to them, it will be discussed in the topics to come.
Working towards financial freedom is definitely a major action step and definitely worth celebrating. For no decision has been made until an action is taken. However, the question next will be are we taking the right approach towards it? If so which is the recommended way?
My personal recommendation is pick up a part-time business, and in the meantime, nourish yourself with financial knowledge, business mindset, build on network and keep failing. Fail, assess your mistake, learn and improve, then repeat again. The experience along the way should be fulfilling enough. Then again, that is, if you are able to take the heats of this game.
Good luck! And I hope we are able to contribute to your success in one way or another.